Our new report argues that the knowledge economy is cut off from most people - but it doesn't have to be this way.
Think of the knowledge economy and you might well think of Cambridge. It’s home to around 5,000 knowledge-intensive businesses: pharma and life sciences, software, electronics and high-tech manufacturing.
High-tech, creative, ‘knowledge’ businesses like these drive advanced economies. In the UK, they’re responsible for much of our productivity growth: between 1990 and 2017, productivity more than doubled in information and communications and tripled in pharmaceuticals.
The knowledge economy is all around us. We nearly all take part in it as consumers. Worldwide, there are already three times more smart devices than there are people.
But the makers and shapers of the knowledge economy are concentrated in a relatively small number of places and firms.
In the UK, for example, more than half of R&D expenditure takes place in London, the South East and the East of England. In the East of England, average R&D spend per head of population is £924, compared with just £230 in Wales.
If you tot up patents per head of population, Cambridge is the most innovative city in the UK. It’s also the most unequal. The benefits of the knowledge economy are not ‘trickling down’ to everyone.
Is this inevitable? Political philosopher, politician and author Roberto Unger argues that it’s not. He argues that the problem is our “poverty of institutional imagination”. We treat the structures of the market economy as if they’re somehow natural, and fixed - when in fact, we can, and should, be able to imagine alternatives.
Over the last year, we’ve been working with Unger to explore what these alternatives could be. In Imagination Unleashed: Democratising the Knowledge Economy, we set out a vision for a knowledge economy that’s radically more inclusive.
We argue that an inclusive knowledge economy requires action on three fronts. First, we need to democratise the economy. This means radically widening access to capital and productive opportunity, transforming models of ownership, addressing concentrations of power (particularly among the tech giants), and getting far more people involved in deciding the direction of innovation.
It also requires us to create a high energy democracy. To take charge of the knowledge economy, we need to spread the creativity and agency that characterises it into democracy itself. This means, for example, promoting experimental government, and an independent and empowered civil society.
The knowledge economy gives us potential to be more than cogs in wheels. We hear a lot about machines replacing humans, but in fact the knowledge economy makes our unique human qualities even more important - it relies on our ability to imagine what’s not already there.
But it also brings uncertainty and disruption. We need to make sure people are prepared - not only to be consumers, but to make and shape the new economy. And this can’t just be those with the benefit of wealth behind them. We need to establish a social inheritance, so that everyone can face the new economy with confidence.
There are many forms this could take. Singapore and France are showing the way on a modest scale. For example, in France, the Compte Personnel de Formation (individual training account) credits full-time workers with 24 hours of training per year worked, up to a maximum of 150 hours. We suggest that this model could be extended to provide support for other expenses associated with learning, similar to those provided to people doing jury service. It could be funded from increases in inheritance tax receipts, which have been growing by 10% year-on-year. This way the educational and development opportunity of inherited wealth can be unlocked from already wealthy families and spread across society as a whole.
Alongside new entitlements, we need tools to help people navigate a changing labour market (something that Nesta’s Open Jobs project is starting to explore), and new ways to provide lifelong learning, including within firms.
The three goals of democratising the economy, establishing a social inheritance, and democratising democracy are broad and ambitious, but they’re not impossible.
In the report, we reference many examples of real policies and programmes that embody some of these principles already - from the National Investment Banks that exist in many countries, to new experiments in spreading innovative practices to firms beyond the frontier (like Business Basics in the UK); from experiments in participatory democracy in Madrid, Barcelona and Taiwan to experiments in new models of business ownership.
But creating an inclusive knowledge economy is not just a technical agenda. It’s also about the stories societies and politicians tell. Our story is not simply about economic growth, but about the power and potential of the individual and collective imagination. Rather than limiting ourselves to mitigating negative consequences of change, we need a story about how to take control and shape a knowledge economy that truly allows mass participation. The experimentalist impulse, everywhere.